Start with the basics

Klein believes it’s important to train front-line staff to discuss share insurance with members who question the safety of funds deposited in the credit union.

“As credit union staff, it’s our job to make sure we make members feel comfortable that the funds they deposit will always be there,” Klein says.

Credit unions must also ensure they comply with the myriad regulations designed to protect members, such as state-level rules for handling interest on lawyer trust accounts. That includes small but significant details such as documenting that interest is properly transmitted to the right funds.

Critical challenges

As a risk management expert, consultant, and speaker, Klein addresses “all things risk” all the time. His work at Ncontracts builds on 30 years working at credit unions, first as general counsel and then as chief risk officer when risk management gained a defined role in ongoing operations.

Klein says vendor management policies must classify vendors so the credit union addresses risk to members at the right level, with examiners looking closely at risk assessments and vendor management.

“Credit unions are mandated to conduct due diligence on the vendors they’re using to make sure they have proper controls in place,” Klein says. “For example, make sure your core provider has a business continuity plan in place, remains strong financially, has a good reputation, and has effective controls such as firewalls in place to make sure member information is secure.”

An enterprise risk ‘umbrella’

Enterprise risk management is the “umbrella” that covers all risks the credit union faces. Understanding those threats starts with determining inherent risk by assessing the probability and severity of potential damage for a specific function or operation within the credit union.

Ongoing risk assessments help credit unions evaluate the effectiveness of controls to identify and correct deficiencies.

“A robust enterprise risk management program shows exposure trends within the credit union—where it’s peaking, where it’s staying constant, and where you need to place more attention to certain items,” he says.

Be honest about deficiencies

Klein shares three best practices to help you manage risk:

Acknowledge deficiencies so you can focus on fixing them instead of hiding them.

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